Ralph Lauren quietly shuttered its two-year-old 20,000-square-foot store last week. Other brands are expected to close boutiques in a city that has lost its luster for cash-rich mainland Chinese tourists.

SHANGHAI — At the opening of the exhibition “Salvatore Ferragamo: Evolving Legend 1928-2008” on Friday at the Shanghai Museum of Contemporary Art, the biggest crowd-pleaser wasn’t the collectable bags, the chandelier of perfume bottles, the walls of shoes, or even the vintage footwear that had been worn by Hollywood icons like Mary Pickford, Douglas Fairbanks, Elizabeth Taylor and Marilyn Monroe. Rather, it was the workshop, where craftsmen worked away on bags, belts and shoes displaying the various states and steps of their production.

Craftmanship and heritage competed with glamour throughout the three days of events the Ferragamo brand held here to commemorate its 80th anniversary and display its growing business in the Far East. In addition to the exhibition, Ferragamo last weekend launched a timepiece line and a fragrance, held a private cocktail party at the Shanghai home of Hong Kong socialite Pearl Lam and staged a fashion show and party.

The anniversary show at MoCA was “made and designed for Shanghai,” said Ferragamo chief executive officer and group managing director Michele Norsa, although the show is an extension of the original retrospective that debuted in 1985 at the brand’s headquarters. It will return to Italy later this year, and then will continue on the road; it has already received invitations from Bangkok and Dubai.

The exhibition includes sections on Ferragamo’s relationships with the film industry and art world; Florence and the brand’s Palazzo Spini Feroni; the craftmanship, materials and anatomical fit; technology and logos, and silk printing. Many of the items are displayed in small pagodas in the shapes of Ferragamo’s iconic bags.

The fashion show and party were held in two elaborately redone massive halls at the semicompleted Shanghai International Ferry Terminal in the Hongkou District, along the northwest shore of the Huangpu River. The terminal is part of an enormous area, including the historic Jewish ghetto, that is being mostly demolished and rebuilt under the title North Bund and the auspices of the 2010 World Expo in Shanghai. The show, of Ferragamo’s fall line, opened and closed with elegant performances by Italian ballet dancer and Ferragamo brand ambassador Roberto Bolle. The waterfront party included fireworks from across the river and a passing barge with a giant LCD screen showing the brand’s ads.

The opening at MoCA was attended by Western celebrities Christina Ricci, Jennifer Jason Leigh, Ginnifer Goodwin, January Jones, and Melissa George, and Chinese actress Ziyi Zhang. They were additionally joined that evening by Hong Kong actors Tony Leung and Karen Mok, along with several other luminaries from the region.

The Ferragamo family chose China and specifically Shanghai for the anniversary “for the country’s rich history and traditions,” explained Wanda Ferragamo, honorary chairwoman of the company and widow of founder Salvatore.

“Salvatore Ferragamo first came to Japan in 1950, and since then the brand has had a home in the world, especially Asia,” remarked Norsa at the timepiece launch. “About 46 to 48 percent of our turnover is in Asia, so one of every two of our customers is Asian.”

He added the brand’s three best markets are Seoul, Tokyo and Hong Kong.

The timepiece line, designed under license with Timex, makes its debut officially next week at the Baselworld exhibition in Switzerland. Forty designs are split between men’s and women’s and into four lines: Gancino, Vara, Salvatore and F-80. Timepieces, particularly men’s watches, are generally considered one of the more successful subsets of the luxury goods business in China. “I think it is going to be one of the best markets in the world, and for men’s there is huge interest,” Norsa told WWD. “Our pricing of $1,000 to $5,000, going up to $15,000, is an interesting range.”

Ferragamo also released a new fragrance, called Tuscan Soul. “I think there is a lot of interest in fragrances generally in Asia — for fragrances, cosmetics, all skin products,” Norsa continued. “And we have a plan to develop a fragrance business in China, because you see big spaces [for them] in the new department stores, while 10 years ago, you could not even find a cosmetics or a fragrance space, and now it’s becoming bigger and very visible.”

Ferragamo’s business in Mainland China has continued to expand steadily, with the brand’s signature shoes, bags and small leather goods accounting for 85 percent of sales in the country. However, added Norsa, “We see changes where we open larger stores. One reason it was difficult to sell ready-to-wear is originally the stores were not that big, and had no space for presenting clothing.”

Ferragamo has 25 stores in 18 cities on the Mainland, adding six stores in 2007 and eight in 2008. Ferragamo also has six duty free stores in Chinese airports, one each in Guangzhou and Dalian, and it just opened second outlets in the new terminals in Beijing and Shanghai, with the latter more than 1,000 square feet. “What is doing extremely well is the business in the airports,” Norsa enthused. “The number of passengers is growing so fast. I expect [the new shops] will be doing tremendous business.”

While the company has only two stores in Shanghai — in The Ritz-Carlton on Nanjing Road and Times Square on Huaihai Road — two more are in the works for before 2010. In Beijing, Ferragamo has four stores, two added last year at Shinkong Plaza and Seasons Place. An older Beijing store in China World “remains our best-performing store by square meter,” Norsa said. “As usual in China, customers don’t move very fast to the new stores — [as] I’ve seen over the past 15 years. But in recent months, sales at those have picked up significantly….Our stores in China break even very fast. Stores have long opening hours, and 365 days a year. I see a lot of traffic and a lot of young customers.”

Like many luxury brands in China, Ferragamo is shifting its focus to second-tier and inland cities. The brand’s other top-performing stores include Hangzhou Tower, in the capital of the wealthy coastal Zhejiang Province, and one in Chengdu, in the western Sichuan Province. “What Ferragamo has always done is pioneering, entering the market very early, so if you get to a lot of new cities and get visible, you get more customers. In most of these cases you can also get a very nice store frontage, you can get a facade, you can have billboards, which is also one of our goals, to communicate in China, which is not so easy with the traditional media, magazines and newspapers,” Norsa observed.

In Kunming, one of several cities where Ferragamo is opening stores this year, “We used to have a very small store, but there are new shopping malls and department stores, where Gucci is opening up, and we found a very nice corner space on the street with three windows. I was very impressed with the spending power of these cities, like even Xian, Chengdu. And I think that what is important is there are lots of people who can afford luxury goods but do not really travel so often, people who are not speaking languages, if they travel even by plane, they travel for a day, for business. So I think it’s very, very important [to be there].”

The company is looking to open in most of the Chinese cities with populations of more than three million people, he added.

Ferragamo already opened a store this year in the northeastern city of Shenyang, and has more coming in the tourist-driven cities of Kunming, Sanya and Qingdao and in Wuxi, a business center near Shanghai, and Urümqi, the capital of the Xinjiang Autonomous Region. Like Tibet, Xinjiang has an indigenous population that alleges religious repression and racial discrimination by the Han Chinese government. Despite the company’s retail presence, Norsa stressed Ferragamo’s manufacturing will remain firmly grounded in Italy. Regarding outsourcing, he said, “No absolutely. Not even our shopping bags are [outsourced]. When I joined Ferragamo I found it is written in stone that we only manufacture in Italy.

“I think in China, customers are very loyal to the quality of a product, and very much interested in how you manufacture, the craftsmanship, where it comes from,” he continued. “Asians, and mostly Chinese, are not really looking for cheap products from the luxury brands. What I’ve also seen is a shift in the product; for example, in men’s shoes, we were selling the expensive but not really the top of the range until last year, and now I met a customer buying 1,500 pairs of the most expensive shoes.”

Hong Kong remains a strong market for the brand and a draw for Mainland customers. “There are differences; certainly Hong Kong is more mature in terms of its customer base” than China, remarked company chairman Ferruccio Ferragamo.

“I think when you see Chinese from Mainland China traveling to Hong Kong, they still mostly shop on the Kowloon side and are still very focused on the logo products, which is typical of the developing markets,” Norsa added. “While Hong Kong is becoming less logo-driven, more like European consumers.”

He continued that Macau is another big focus, and a market that “will be exploding in Asia in the next two to three years.” Ferragamo already has one location in the Mandarin Hotel there, and will open another in the Venetian in September, and two more by 2010.

Ferragamo has 10 stores in Taiwan, which, like Hong Kong, is an established and sophisticated market.

In the rest of Asia, Norsa continued, “[South] Korea for us is one of the most important markets…quite consolidated. We do in Korea a business that is slightly higher than what we do in Italy, so it in fact is very, very significant.” The brand has 25 stores there, with one more opening this year. “Recently, we have seen very nice development in Malaysia, for example, and a market that could become very important is Vietnam, where we have been present three or four years. We are also present in the Philippines and we are one of the few companies with a self-standing boutique in Manila. And then, of course, there is India.”

Ferragamo was on the verge of launching in the South Asian giant a few years ago, and that remains the status due to problems with infrastructure and delays in real estate developments. The brand will soon open in the duty free area of the Mumbai airport, and has stores in the works for later this year at the Emporio in New Delhi and in Bangalore. Also problematic in India, Norsa added, are duties of around 35 to 37 percent, varying by category, but not country of origin, a situation the brand and Italian trade representatives are lobbying to have changed. “Still there is big potential, and relatively small business for the time being.”

Import duties also continue to drive up prices in China, and Ferragamo’s Mainland prices are 10 to 13 percent higher than elsewhere. Norsa added he did not see China’s double-digit inflation, which the government and population consider to be nearing crisis levels, as a concern. “On one side, I think there is no devaluation of the renminbi [yuan] towards the European currency, so this is all right. And I think with the level of growth and the salaries, which are growing more than proportionally in some cases, I don’t think inflation will have an impact on our business. The opposite — I think the strong economic growth will help the development of the business, with more people making more money.”

As for counterfeiting, “I have not seen it as a major problem in China. It seems there is now a lot more product on the market than there was six months ago, which means the brand is very hot, on the one side. But in terms of business, I don’t think it’s really hurting because the Chinese really want to buy the original, it’s just tourists who want to buy the counterfeits.”

But with new hotels and malls going up almost daily, it often is difficult to determine which retail project is best to become involved in. Ferragamo works in China through the Hong Kong franchisee Imanginex, which is experienced at shepherding luxury brands on the Mainland.

“This is one of the markets where it is more easy to make mistakes. For example, hotels will change their names and ownership,” said Norsa. “When we look at China, it is so big that sometimes it is a challenge to understand how we will be able to manage a market that is so big.”

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